I only found some things, like meeting short-term goals and buying-back shares of shareholders, that can have influence on economic growth. In the share buy-back article (The Economist, 2014) is only stated that “They worry…will damage…the economy.” and they don’t come up with hard evidence. In the studies about monitoring and controlling managers of firms, they found evidence that not monitoring will lead to an incentive for managers to shrink (Jensen and Meckling, 1976). Also the compensation of managers will be higher when they are not controlled by institutional investors (Hartzell and Starks, 2003). This means that without monitoring and controlling by institutional investors, there is an agency problem which can lead to maximizing personal wealth of managers instead of maximizing value of the firm.
Many economists have argued that determining a growth strategy is not a simple task for any state, and in any case it is, the developing countries will have grown enough to move their economy with the developed country. It is out of this problematic issue of determining the right formula to apply in a given country that is aimed at achieving a desired economic growth, Economist Solow to come up with Solow Growth Model, which emphasis on the progress in technology that result in the growth of an economy. Solow argued that without the use of technology, economic growth will cease due to diminishing returns in inputs (Solow, 1956). Despite the fact that this factor of technological development has not gained universal acceptance, it has influenced
First, he explains that the so-called “poverty trap” is not the cause of poor nations’ slow or nonexistent growth, despite the claims of foreign aid organizations. Easterly argues instead that bad governments and their interference with their economies may be the reason for many countries’ slow growth. To fix this problem, many aid organizations attempt to assist poor nations by restructuring their economic institutions from the top down. However, Easterly claims that these attempts have shown to be futile time and time again. He argues that this is because restructuring an entire economy from the top down is almost always bound to fail.
Foreign Aid and Economic Growth The economic objectives of foreign aid are to induce high growth rates in Less Developing Countries which in turn will generate additional domestic savings and investment. However, there is much dispute as to whether development assistance to poor countries has been successful in achieving these objectives. There have been numerous attempts to investigate the effects of foreign capital in terms of direct foreign investment, and foreign aid and other foreign inflows on developing countries, their results have been conflicting. Aid antagonists like Bauer claim there is a negative causal relationship between aid and growth in less developing countries. This is because aid retards growth by substituting
They found a significant and negative relationship between income and democracy. That means higher or lower incomes per capita hinder or trigger democratization. They drew information from two sources of variation overlooked by previous scholars. One is cross country variation in the short term responses to income shocks; another is variation in the structure and composition of income. In countries that receive little or no income from resources the relationship between democracy and income is positive and significant.
Modernization have some gaps that makes it inapplicable for Jordan here I will discuss the following to show why it’s a problematic for Jordan : a) The open market for investment and privatization did not improve the economic in Jordan, b) The external factors and the population growth as Jordan in the middle of a conflict zone. Here in this essay I will give a background
There are positive roles of MNCs , they are; 1. Filling Savings Gap: The first important contribution of MNCs is its role in filling the resource gap between targeted or desired investment and domestically mobilized savings. 2. Filling Trade Gap: The second contribution relates to filling the foreign exchange or trade gap. An inflow of foreign capital can reduce or even remove the deficit in the balance of payments if the MNCs can generate a net positive flow of export earnings.
However, Amartya Sen would disagree with this approach advocating Freedom; freedom is both the primary end and the principal means of development. If a state has political freedoms, economic facilities, social opportunities, transparency guarantees, and protective security it will enhances the ability of individuals to help themselves, a property that Sen describes as the ‘agency aspecy’ of the individual (Sen, 1999:19). especially since they are labor-intensive and since labor is so cheap in poor countries. Thus, he argues against the ‘Lee Thesis’, named for President Lee Kuan Yew of Singapore (Later years in power were marred by rampant government corruption, economic stagnation, the steady widening of economic inequalities between the rich and the poor).
The paper also illustrates that loans are more effective than grants .Victor Levy (1988) finds that aid has contributed positively to investment and economic growth of low income countries in sub Saharan
They further stated that poverty, which is considered as great violence in acceleration of economy, is the responsibility of every one of us to give the poor a helping hand so that shade of poverty can be shed. Reddy and Manak (2005) observe that the results from these self-help groups (SHGs) are promising and have become a focus of intense examination as it is proving to be an effective method of poverty reduction. Wan et al (2011) writes that while economic growth is necessary, it is insufficient to guarantee significant poverty reduction. The results in their study demonstrate that the impact of growth on poverty was smaller during 2005-2008 relative to 2002-2005. This corroborates the observed increases in inequality in Asia and the Pacific, implying the need for more inclusive growth.